Proposal to Establish a Capital Reserve Fund
Planning for the Future of Liberty Central
School District
A separate proposition will be placed on the May 17 ballot seeking
voter approval to establish a Capital Reserve Fund in the amount of
$5 million over a ten-year period to address future renovations and
repairs within the district.
As a taxpayer, it is important to know that the district is
exploring every possible avenue when it comes to saving money. In
today’s economy, proper long term planning is essential to ensuring
the solvency of the district during times of fiscal hardship.
Establishing a capital reserve fund now allows the district to plan
for the long-term needs of the district.
Below are some frequently asked questions about the establishment of
a Capital Reserve Fund.
What is a capital reserve fund?
A capital reserve fund allows the district to set aside money for
future construction projects and major purchases. It can be likened
to a savings account, and the fund cannot even be established
without voter approval. The fund also cannot be spent without voter
approval.
Where does the money for the capital reserve fund come from?
Money would only be added to the capital reserve fund if there is
excess money left at the end of the fiscal year. If there is no
excess, then no money is added to the capital reserve fund.
Will my taxes go up due to the establishment of a capital
reserve fund?
No, taxes would not increase due to the capital reserve fund. The
fund only accrues a balance if there is an excess of money at the
end of the district’s fiscal year.
Why establish a Capital Reserve Fund now?
1. The fund can only be established with voter
approval, therefore needs to be placed on a ballot. Asking the
voters to decide on this proposition during the May 17th election
saves the district and tax payers from having to finance a separate
referendum at a later time.
2. New York State’s financial crisis has created an
uncertainty as to how school districts will receive future funding
in numerous areas, including building aid. Should the district need
to fund a major construction project in the future, it would be
better prepared if state aid were immediately available.
Didn’t the district just complete a building project? Why
would we need to build more?
There are still areas of the district that need to be renovated or
will need replacement in the future. A good example would be many of
the windows in the high school that were not replaced when the
Middle School was built in 1990. These original windows are over 45
years old and will eventually need to be replaced. Energy efficient
windows will pay for themselves in the long-run by conserving on
ever-rising fuel costs.
What kinds of projects can the money be used for?
The capital reserve fund can only be used with voter
approval, so any proposed project using the fund would have to be
presented to and decided upon by the community. Major building
projects (windows in the high school) or purchases (i.e. a new
boiler, if one were needed) could be funded using a capital reserve.
How does a capital reserve benefit the taxpayers?
The recently completed $35.8 million building project at Liberty
High School and Liberty Elementary School (to be completed in June,
2011) was partially funded by a $5 million capital reserve account
established some years ago. That $5 million plus state aid brought
down the local share of the cost to 20%. Using this fund also meant
that the district didn’t need to borrow as much, and therefore pay
interest on it. This ultimately saved the taxpayer money.
Why does the district need a capital reserve fund to set
aside money?
The Government Finance Officers Association recommends that
governmental bodies maintain an unreserved fund balance of 5 to 15
percent of the general fund. However, state rules prohibit school
districts from keeping more than 4 percent of the districts’ budget
in an undesignated reserve account. Capital reserve funds are exempt
from that limitation, allowing schools to save for major expenses,
both planned an unplanned.
